We wrote this book to equip students with the accounting techniques and insights necessary to succeed in today’s global business environment. It reflects our combined experience in teaching financial accounting to students at all levels and in several countries. For anyone who pursues a career in business, the ability to read, analyse, and interpret published financial reports is an essential skill. Financial Accounting using IFRS is written for future business leaders who want to understand how financial statements are prepared and how the information in published financial reports is used by investors, creditors, financial analysts, and managers. Our goal is to provide the most engaging, relevant, and accessible textbook available.

Target Audience

Financial Accounting using IFRS is intended for use in the first financial accounting course at either the undergraduate or graduate level at universities that want to teach IFRS (U.S. GAAP is not covered). This book balances the preparation of financial statements with their analysis and interpretation. This book accommodates mini-courses lasting only a few days as well as extended courses lasting a full semester.

Financial Accounting using IFRS is real-world oriented and focuses on the most salient aspects of accounting. It teaches students how to read, analyse, and interpret financial accounting data to make informed business decisions. To that end, it consistently incorporates real company data, both in the body of each chapter and throughout the assignment material.

Real Data Incorporated Throughout

Today’s business students must be skilled in using real financial statements to make business decisions. We feel strongly that the more exposure students get to real financial statements, the more comfortable they become with the variety in financial statements that exists across companies and industries. Through their exposure to various financial statements, students will learn that, while financial statements do not all look the same, they can readily understand and interpret them to make business decisions. Furthermore, today’s students must have the skills to go beyond basic financial statements to interpret and apply nonfinancial disclosures, such as footnotes and supplementary reports. We expose students to the analysis and interpretation of real company data and nonfinancial disclosures through the use of focus companies in each chapter, the generous incorporation of footnotes, financial analysis discussions in nearly every chapter, and an abundance of assignments that draw on real company data and disclosures.

Focus Companies for Each Chapter

Each chapter’s content is explained through the accounting and reporting activities of real companies. Each chapter incorporates a “focus company” for special emphasis and demonstration. The enhanced instructional value of focus companies comes from the way they engage students in real analysis and interpretation. Focus companies were selected based on student appeal and the diversity of countries and industries.

Chapter 1

Roche (Switzerland)

Chapter 7

VTech (Hong Kong)

Chapter 2

Indigo (Canada)

Chapter 8

Airbus (France and Germany)

Chapter 3

Indigo (Canada)

Chapter 9

Samsung Electronics (South Korea)

Chapter 4

Qantas Airways (Australia)

Chapter 10

Unilever (The Netherlands and United Kingdom)

Chapter 5

Vodafone (United Kingdom)

Chapter 11

Thomson Reuters (Canada)

Chapter 6

TomTom (The Netherlands)

Chapter 12

SMRT (Singapore)

Footnotes and Management Disclosures

We incorporate footnote and other management disclosures, where appropriate, throughout the book. We explain the significance of the footnote and then demonstrate how to use the disclosed information to make managerial inferences and decisions. A representative sample follows.

Financial Analysis Discussion

Each chapter includes a financial analysis discussion that introduces key ratios and applies them to the financial statements of the chapter’s focus company. By weaving some analysis into each chapter, we try to instill in students a deeper appreciation for the significance of the accounting methods being discussed. One such analysis discussion follows.

Assignments that Draw on Real Data

It is essential for students to be able to apply what they have learned to real financial statements. Therefore, we have included an abundance of assignments in each chapter that draw on recent, real data and disclosures. These assignments are readily identified by an icon in the margin that includes the company’s name and its country of origin. A representative example follows.

Balanced Approach

As instructors of introductory financial accounting, we recognise that the first financial accounting course serves the general business students as well as potential accounting majors. Financial Accounting embraces this reality. This book balances financial reporting, analysis, interpretation, and decision making with the more standard aspects of accounting such as journal entries, T-accounts, and the preparation of financial statements.

3-step Process: Analyse, Journalise, Post

One technique we use throughout the book to maintain a balanced approach is the incorporation of a 3-step process to analyse and record transactions. Step 1 analyses the impact of various transactions on the inancial statements using the financial statement effects template. Step 2 records the transaction using journal entries and Step 3 requires students to post the journal entries to T-accounts.

The template captures each transaction’s effects on the four financial statements: the balance sheet, income statement, statement of changes in equity, and statement of cash flows. For the balance sheet, we differentiate between cash and noncash assets to identify the cash effects of transactions. Likewise, equity is separated into the contributed and earned capital components (the latter includes retained earnings as its major element). Finally, income statement effects are separated into revenues, expenses, and net income (the updating of retained earnings is denoted with an arrow line running from net income to earned capital). This template provides a convenient means to represent financial accounting transactions and events in a simple, concise manner for assessing their effects on financial statements.

Innovative Pedagogy

Business Insights

Students appreciate and become more engaged when they can see the real-world relevance of what they are learning in the classroom. We have included a generous number of current, real-world examples throughout each chapter in Business Insight boxes. The following is a representative example:

Decision Making Orientation

One primary goal of a financial accounting course is to teach students the skills needed to apply their ccounting knowledge to solving real business problems. With that goal in mind, You Make the Call boxes in each chapter encourage students to apply the material presented to solving actual business scenarios.

Mid-Chapter and Chapter-End Reviews

Financial accounting can be challenging — especially for students lacking business experience or previous exposure to business courses. To reinforce concepts presented in each chapter and to ensure student comprehension, we include mid-chapter and chapter-end reviews that require students to recall and apply the financial accounting techniques and concepts described in each chapter.

Research Insights for Business Students

Academic research plays an important role in the way business is conducted, accounting is performed, and students are taught. It is important for students to recognise how modern research and modern business practice interact. Therefore, we periodically incorporate relevant research to help students understand the important relation between research and modern business.

Flexibility for Courses of Varying Lengths

15 WeekSemester-Course

10 WeekQuarter-Course

6 WeekMini-Course

1 WeekIntensive-Course

Chapter 1

Week 1

Week 1

Week 1

Day 1

Chapter 2

Week 2 & 3

Week 2

Week 1 & 2

Chapter 3

Week 3 & 4

Week 3 & 4

Week 2 & 3

Day 2

Chapter 4

Week 5 & 6

Week 4 & 5

Optional

Optional

Chapter 5

Week 6 & 7

Optional

Optional

Optional

Chapter 6

Week 7 & 8

Week 6

Week 3

Day 3

Chapter 7

Week 9

Week 7

Week 4

Chapter 8

Week 10

Week 8

Week 5

Day 4

Chapter 9

Week 11 & 12

Week 9

Week 6

Day 5

Chapter 10

Week 12 & 13

Week 10

Week 6optional

Skim

Chapter 11

Week 14

Optional

Optional

Optional

Chapter 12

Week 15

Optional

Optional

Optional

New in the Second Edition

New Co-author: Michelle Hanlon, the Howard W. Johnson Professor and Professor of Accounting at the MIT Sloan School of Management, joined the 2nd IFRS edition. Michelle has won several awards for her research and is he winner of the 2013 Jamieson Prize for Excellence in Teaching at Sloan where she regularly teaches introductory financial accounting to MBAs. Hanlon recently testified in front of the U.S. Senate Committee on Finance and the U.S. House of Representatives Committee on Ways and Means regarding U.S. tax policy. She brings a wealth of knowledge and expertise to this best-selling author team.

Updated Standards: As appropriate, the text and assignments have been updated to reflect the latest standards. A brief discussion of the pending revenue recognition standard is included in Chapter 6 and the chapter-end appendix contains more detailed coverage of the new standard. Chapter 10 now includes a discussion of the new lease standard.

In addition to the chapter-specific changes, there have been several changes that span the entire book. Some of these global changes include: updated numbers for examples, illustrations, and assignments that use real data; updated footnotes and other nonfinancial disclosures; updated excerpts from the business and popular press; and some assignments have been revised or replaced with new assignments.

Supplement Package

Fundamentals of Financial Accounting Tutorial

This interactive tutorial is intended for use in programs that either require or would like to offer a pre-term tutorial that creates a baseline of accounting knowledge for students with little to no prior exposure to financial accounting. Initially developed as a pre-term tutorial for first year MBA students, this product can be used as a warm-up for any introductory level financial accounting course. It is designed as an asynchronous, interactive, self-paced experience for students.

Companion Casebook

Cases in Financial Reporting, 8th edition by Michael Drake (Brigham Young University), Ellen Engel (University of Chicago), D. Eric Hirst (University of Texas – Austin), and Mary Lea McAnally (Texas A & M University). This book comprises 27 cases and is a perfect companion book for faculty interested in exposing students to a wide range of real financial statements. The cases are current and cover companies from Canada, France, Austria, the Netherlands, the UK, India, as well as from the U.S. Many of the U.S. companies are major multinationals. each case deals with a specific financial accounting topic within the context of one (or more) company’s financial statements. Each case contains financial statement information and a set of directed questions pertaining to one or two specific financial accounting issues. This is a separate, saleable casebook (ISBN 978-1-61853-122-3). Contact your sales representative to receive a desk copy or email customerservice@cambridgepub.com.

For Instructors

Solutions Manual: Created by the authors, the Solutions Manual contains complete solutions to all the assignment material in the text.

Test Bank/Computerised Test Bank: The test bank includes multiple-choice items, matching questions, short-essay questions, and problems. The computerised version of the test bank enables an instructor to add and edit questions; create up to 99 versions of each test; attach graphic files to questions; import and export ASCII files; and select questions based on type or learning objective. It provides password protection for saved tests and question databases and is able to run on a network.

PowerPoint: The PowerPoint slides outline key elements of each chapter.

Website: All instructor materials are accessible via the book’s website (password-protected) along with other useful links and marketing information.

For Students

Website: Practice quizzes and other useful links are available to students free of charge on the book’s website.

M.H. Franco Wong is CPA Ontario Professor of Financial Accounting at the Rotman School of Management at the University of Toronto.

He earned his Ph.D. degree in accounting from the Wharton School of the University of Pennsylvania and his B.A. and M.A. in economics from the University of Lethbridge and Simon Fraser University, respectively. Professor Wong has also taught at the University of California at Berkeley’s Haas School of Business, University of Chicago’s Graduate School of Business (now Booth), and INSEAD. During the 2013–2014 academic year, he was president of the Chinese Accounting Professors’ Association of North America.

Professor Wong’s research focuses on the production and dissemination of accounting information and the use of accounting information for valuation and contracting purposes. He has examined financial reporting issues about derivatives financial instruments, internet companies, employee stock options, share repurchases, earnings management, real investment effects of accounting, and equity research analysts. His research has appeared in leading academic journals, including Journal of Accounting and Economics, Journal of Accounting Research, Review of Accounting Studies, and The Accounting Review. Professor Wong has given over 100 presentations at numerous business schools and conferences around the world. Between 2007 and 2013, he co-organised eight academic conferences in Canada, China, and France.

Professor Wong has taught financial accounting and financial statement analysis to undergraduate and MBA students. He has received several awards for teaching excellence at the Haas School of Business and Rotman School of Management.

In addition to teaching accounting and quantitative analysis, he has taught in Cornell’s Executive Development Program. He earned his doctorate degree from the University of Michigan. He is a former member of the Financial Accounting Standards Board Advisory Committee and the Financial Accounting Foundation, which oversees the FASB. He was president of the American Accounting Association in 1982 and received the association’s Outstanding Educator Award for the year 1987. He also received the AICPA’s Notable Contributions to Accounting Literature Award in 1966 and 1977.

Professor Dyckman has extensive industrial experience that includes work with the U.S. Navy and IBM. He has conducted seminars for Cornell Executive Development Program and Managing the Next Generation of Technology, as well as for Ocean Spray, Goodyear, Morgan Guaranty, GTE, Southern New England Telephone, and Goulds Pumps.

Professor Dyckman has coauthored eleven books and written over 50 journal articles on topics from financial markets to the application of quantitative and behavioral theory to administrative decision making. He has been a member of the editorial boards of The Accounting Review, The Journal of Finance and Quantitative Analysis, The Journal of Accounting and Economics, The Journal of Management Accounting Research, and The Journal of Accounting Education.

Michelle L. Hanlon is the Howard W. Johnson Professor at the MIT Sloan School of Management. She earned her doctorate at the University of Washington.

Prior to joining MIT, she was a faculty member at the University of Michigan. Professor Hanlon has taught financial accounting to undergraduates, MBA students, executive MBA students, and Masters of Finance students. Professor Hanlon also teaches Taxes and Business Strategy to MBA students. She is the winner of the 2013 Jamieson Prize for Excellence in Teaching at MIT Sloan.

Professor Hanlon’s research focuses primarily on the intersection of taxation and financial accounting. Her recent work examines the capital market effects of the accounting for income tax, the reputational effects of corporate tax avoidance, and the economic consequences of U.S. international tax policies for multinational corporations. She has published research studies in the Journal of Accounting and Economics, the Journal of Accounting Research, The Accounting Review, the Review of Accounting Studies, the Journal of Finance, the Journal of Financial Economics, the Journal of Public Economics, and others. She has won several awards for her research and has presented her work at numerous universities and conferences. Professor Hanlon has served on several editorial boards and currently serves as an editor at the Journal of Accounting and Economics.

Professor Hanlon has testified in front of the U.S. Senate Committee on Finance and the U.S. House of Representatives Committee on Ways and Means about the interaction of financial accounting and tax policy. She served as a U.S. delegate to the American-Swiss Young Leaders Conference in 2010 and worked as an Academic Fellow at the U.S. House Ways and Means Committee in 2015.

Robert P. Magee is Keith I. DeLashmutt Professor of Accounting Information and Management at the Kellogg School of Management at Northwestern University.

He received his A.B., M.S. and Ph.D. from Cornell University. Prior to joining the Kellogg faculty in 1976, he was a faculty member at the University of Chicago's Graduate School of Business. For academic year 1980-81, he was a visiting faculty member at IMEDE (now IMD) in Lausanne, Switzerland.

Professor Magee's research focuses on the use of accounting information to facilitate decision-making and control within organizations. He has published articles in The Accounting Review, the Journal of Accounting Research, the Journal of Accounting and Economics, and a variety of other journals. He is the author of Advanced Managerial Accounting and co-author (with Thomas R. Dyckman and David H. Downes) of Efficient Capital Markets and Accounting: A Critical Analysis. The latter book received the Notable Contribution to the Accounting Literature Award from the AICPA in 1978. Professor Magee has served on the editorial boards of The Accounting Review, the Journal of Accounting Research, the Journal of Accounting and Economics and the Journal of Accounting, Auditing and Finance. From 1994-96, he served as Editor of The Accounting Review, the quarterly research journal of the American Accounting Association. He received the American Accounting Association's Outstanding Accounting Educator Award in 1999 and the Illinois CPA Society Outstanding Educator Award in 2000.

Professor Magee teaches financial accounting to MBA and Executive MBA students. He has received several teaching awards at the Kellogg School, including the Alumni Choice Outstanding Professor Award in 2003.

Glenn M. Pfeiffer is Professor of Accounting at the George L. Argyros School of Business and Economics at Chapman University.

He received his M.S. and Ph.D. from Cornell University after he earned a bachelor's degree from Hope College. Prior to joining the faculty at the Argyros School, he held appointments at the University of Washington, Cornell University, the University of Chicago, the University of Arizona, and San Diego State University.

Professor Pfeiffer’s research focuses on financial reporting and capital markets. He has investigated issues relating to lease accounting, LIFO inventory liquidation, earnings per share, employee stock options, corporate reorganization, and technology investments. He has published articles in The Accounting Review, the Financial Analysts Journal, the International Journal of Accounting Information Systems, the Journal of Applied Business Research, the Journal of High Technology Management Research, the Journal of Accounting Education, and several other academic journals. In addition, he has published numerous case studies in financial accounting and reporting.

Professor Pfeiffer teaches financial accounting and financial analysis to undergraduate, MBA, and Executive students. He has also taught managerial accounting for MBAs. He has won several teaching awards at both the undergraduate and graduate levels.

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